Exhibit 99.1
Beverly Enterprises Board Rejects Appaloosa Group's Proposals
FORT SMITH, Ark.--(BUSINESS WIRE)--Feb. 3, 2005--Beverly Enterprises, Inc.
(NYSE:BEV) today issued the following letter in response to the alternative
expressions of interest by the Appaloosa group in acquiring BEI:
Mr. Arnold M. Whitman
Chief Executive Officer
Formation Capital, LLC
1035 Powers Place
Alpharetta, Georgia 30004
Dear Arnie:
The Board of Directors of Beverly Enterprises, Inc. (BEI) has
considered your group's alternative indications of interest in
acquiring BEI - expressed through your letters dated
December 22, 2004 and January 19, 2005.
Our Board has unanimously concluded that your proposals are not
in the best interests of BEI or our shareholders. In making this
decision, the Board took into account, among other things:
-- Its confidence in the company's strategic plan and
business segment growth initiatives, the operating and
financial progress we've achieved in recent years, the
proven ability of management to deliver on its commitments
and our prospects for future value creation;
-- Its belief that neither of your alternative transaction
structures, as presented, could be successfully financed
within the terms of your indications of interest;
-- Its serious concern that the highly contingent nature of
your proposals and their underlying financing structures
make them illusory - and that to pursue them would be
futile and would threaten shareholder value;
-- Your apparent reliance on financial engineering - rather
than substantive growth and high-quality patient care -
that would slow BEI's momentum and negatively impact our
financial performance; and
-- The fact that both indications of interest dramatically
undervalue BEI, based upon its current performance levels
and significant growth opportunities.
The Board, in consultation with its legal and financial advisors
--Latham & Watkins and Lehman Brothers, respectively - carefully
conducted its review within the context of a company that has
completed a dramatic financial and operating turnaround, which
has resulted in the creation of substantial value for our
shareholders. Specifically:
-- Our stock has more than quadrupled in price between
January 2003 and January 21, 2005 (the last trading day
prior to the public disclosure of your letters);
-- Our EBITDA from continuing operations (on a comparable
basis) has more than tripled in the past four years;
-- We have enhanced the company's financial position and
strengthened its balance sheet considerably, reducing
total debt by 43 percent and increasing cash nearly
ten-fold during the past four years; and
-- We have established BEI as a leader in providing
innovative clinical services and quality care for the
elderly.
Importantly, the financial market is just now beginning to
recognize the value that we are creating. With strong momentum
behind us, we have begun implementing specific growth initiatives
that contemplate significant capital investments, strategic
acquisitions and the accelerated growth of our service
businesses. Your opportunistic attempt to exploit short term
conditions in the capital markets would deny our shareholders the
dramatic additional value we believe will be generated by these
growth initiatives and by the continued execution of our
long-term strategic plan.
Further, the Board has serious concerns about your ability and
willingness to actually consummate either of the transactions
outlined in your letters. In particular:
-- Neither of your letters identifies a financing structure
or sources of financing;
-- Exploration of even the feasibility of the financing
required to complete either of the transactions would
require protracted and undefined due diligence by your
group that would disrupt our operations - for an outcome
that is uncertain, at best.
-- Our belief that rising interest rates and attendant
changes in the capital markets (including the availability
and cost of leveraged financing, based on either cash
flows or real estate assets) make your alternative
structures even more problematic and uncertain.
The highly-leveraged transactions you contemplate (even if they
were feasible) would ultimately return BEI to the over-leveraged,
financially weak condition the company was in prior to our
turnaround. Prior to our extensive and successful restructuring
program, BEI's heavy debt load made it difficult to make
investments in our business to effectively serve our patient
base, investments that are critical to achieving sustainable
growth and greater value for shareholders in our sector.
Moreover, your principal interest in acquiring our real estate -
in what is essentially a financial transaction - does not take
into account the adverse effects this could easily have on the
political environment in which the long-term healthcare industry
operates, particularly as key Medicaid and Medicare reimbursement
policies remain under review.
Finally, in the Board's view, your suggested transaction
structure fails to recognize the greater overall value that
results from the close fit between BEI's skilled nursing
facilities and our service operations, which we described at
considerable length during our Investor Day last month. It also
ignores the challenges that would be faced by a stand-alone
micro-cap public company composed solely of ancillary service
businesses.
All these factors call into question whether the true
beneficiaries of either of the transactions you outlined would be
BEI shareholders - or only the small group of opportunistic
investors you represent.
The total absence of detail about your financing plans and
sources in your two letters - and the inherent implausibility of
your alternative transaction structures in light of current
(let alone future) capital market conditions - lead us to
conclude that your indications of interest are neither serious
nor credible. In short, we believe your motives are to stampede
us into some form of transaction that will enable your group to
make a quick profit from your newly acquired stock. We are not
interested in playing a game that some would describe as
"green mail."
The Board and management of BEI are committed to delivering value
to all of the company's shareholders, a commitment that we
continue to make significant progress in fulfilling. In light of
the considerations that we have outlined here, the Board has
concluded that the transactions you suggest are not in the best
interests of BEI or its shareholders.
William R. Floyd
Chairman and
Chief Executive Officer
Beverly Enterprises, Inc.
Beverly Enterprises, Inc. and its operating subsidiaries are leading
providers of healthcare services to the elderly in the United States. BEI,
through its subsidiaries, currently operates 351 skilled nursing facilities, as
well as 18 assisted living centers, and 53 hospice and home health centers.
Through Aegis Therapies, BEI also offers rehabilitative services on a contract
basis to facilities operated by other care providers.
CONTACT: Beverly Enterprises, Inc., Fort Smith
Investor Contact:
James M. Griffith, 479-201-5514
or
News Media Contact:
Blair C. Jackson, 479-201-5263